Research shows that some consumers are willing to spend 9.7 percent more on sustainably sourced or produced products.
This significant and growing consumer awareness about sustainability makes sustainable practices not only crucial but a baseline standard for any business wishing to gain and maintain customer loyalty.
But achieving sustainability is complex, especially when balancing the diverse needs of customers, suppliers and regulatory bodies.
The imperative of sustainable procurement
Sustainability is transforming from a moral imperative to a strategic requirement for business success. As a result, procurement teams must seamlessly integrate environmental, social and ethical factors into their purchasing decisions and overall supply chain management tactics.
Sustainable procurement considers the entire lifecycle of products and services, from sourcing and manufacturing to distribution and disposal. Nestlé’s procurement strategy exemplifies this approach, achieving a 13.5% reduction in greenhouse gas emissions since 2018.
Through supplier collaboration and regenerative agriculture, focusing on diverse cropping, biodiversity, collective actions, soil health, and water security Nestle has also achieved a 15.3% cut in methane emissions.
[Editor’s note. We feel it is important to highlight that Nestle was named among the world’s worst plastic polluters in 2020. It was then named among the world’s top three plastic polluters in 2022. And again this year when the company was found to account for approximately 3% of Earth’s plastic waste.]
By 2023, 15.2% of raw materials were from regenerative practices, aiming for 20% by 2025. Additionally, the company’s renewable energy use in operations has risen to 91.9%.
This holistic strategy minimises environmental impact, supports fair labour practices, and ensures transparency and accountability.
The challenges and benefits
While 97% of supply chain professionals value sustainable procurement, only 67% have successfully weaved it into their operations.
This indicates that significant challenges must be addressed. These include the complexity of assessing suppliers, the higher upfront costs of sustainable options, and the necessity for detailed data to inform decision-making.
Challenge no. 1 — Complex supply chains
Large multinational corporations often have intricate and established supply chains. This makes it difficult to ensure consistent sustainability practices across diverse regions. Different regulations and standards and cultural attitudes to sustainable issues create inconsistencies among suppliers. This makes implementation and compliance across the board a considerable challenge requiring careful diligence.
In addressing these challenges, procurement teams are best equipped when they employ robust monitoring tactics, prioritise transparency and maintain compliance with all regulatory requirements. If successfully implemented, these strategies will ensure sustainability goals are met and no aspect of the supply chain is overlooked.
Challenge no. 2 — Initial cost investment
The transition to a sustainable supply chain often involves significant expenses. These include including retraining staff, modifying production lines and ensuring compliance with environmental regulations and certifications as they evolve. Investing in research and development to find or pioneer sustainable alternatives adds to the financial burden.
Generally, smaller businesses struggle with the high upfront costs often associated with more sustainable options. By contrast, larger corporations can more easily afford these investments.
However, technological advancements are gradually making sustainable alternatives more accessible and cost-effective. Innovations like enzymatic recycling, although initially expensive, have promising potential to reduce costs in the long term as the supply of recycled materials becomes a self-sustaining feedstock for the circular economy on which it is built.
Challenge no.3 Stakeholder buy-in and employee satisfaction
Securing stakeholder support for sustainable practices can be challenging, as some stakeholders may prefer familiar methods and be wary of the higher initial costs or upfront investment costs and the short-term financial impact these can have on a business.
However, research shows one in five workers would reject a job at a company with poor sustainability credentials, highlighting the importance of sustainability in not only meeting environmental goals but also in maintaining a competitive edge in the labour market by attracting and retaining motivated, environmentally conscious employees.
Furthermore, Skills Dynamic reports that 99% of supply chain professionals worry about high employee turnover. This is primarily due to pressurised working conditions and nearly a quarter of junior procurement professionals plan to leave their positions.
Businesses that don’t invest in sustainability practices will be less favourable in the eyes of prospective employees, further exacerbating the ongoing issues of burnout and high employee turnover plaguing procurement today.
Strategies for effective sustainable procurement
To successfully integrate sustainability into procurement, organisations need comprehensive strategies that embed sustainability into every aspect of their operations.
1. Develop sustainability-focused policies
Creating robust, sustainability-focused policies is crucial. These policies should outline clear sustainability goals and standards for prospective suppliers, including reducing carbon emissions, minimising waste and ensuring ethical labour practices.
Additionally, organisations should consider nearshoring and reshoring policies to modify current supply chains to accommodate the reduction of carbon footprints and increase resilience in the face of increasingly common geo-political disruption.
Effective policies also involve monitoring and auditing existing suppliers to ensure compliance, driving consistent sustainability practices across the organisation’s supply chain.
2. Implement transparent processes
Digitalisation is an effective way to facilitate transparency throughout the procurement process. Using digital software and centralised systems to log and review all activities, contracts and transactions promotes accountability and helps detect discrepancies between sustainability policies and real-time actions or identify unethical practices.
Enhanced transparency allows a business to cultivate a culture of trust and integrity. This culture permeates both the organisation and relationships with external stakeholders. This reinforces its commitment to sustainability goals and claims.
3. Pre-evaluate suppliers
Incorporating sustainability criteria into supplier evaluations ensures alignment with organisational sustainability goals. Evaluations should assess suppliers based on their environmental impact, ethical labour practices, and overall sustainability performance.
A structured pre-qualification process helps identify suppliers that meet both technical and financial criteria, supporting the organisation’s sustainability objectives.
